Israeli troops have destroyed seven houses in the Rafah refugee camp that the army said were used by Palestinian militants as cover for attacks.
Army bulldozers were sent in to Gaza to demolish the buildings, which Israeli officials said were abandoned.
Residents also reported that missiles were fired from a military helicopter during the overnight operation.
A soldier was badly hurt in the raid, which followed a pattern of action by the army against suspected militants.
The military said the soldier was critically injured after being shot in the head by a sniper.
An Israeli spokesman was quoted by the AFP news agency as confirming the destruction of "several empty houses which had been used as cover for attacks" against troops deployed along the border between Gaza and neighbouring Egypt.
The BBC's Alan Johnston says Palestinian fighters regard attacks on Israeli targets as part of their campaign to end Israel's occupation of Gaza.
A group of Rafah residents staged a demonstration at local government offices, demanding assistance following a series of recent home demolitions.
Reports say the protestors left the government building after the Palestinian leader, Yasser Arafat, promised to send an envoy to hear the residents' grievances.
The United Nations has said about 1,500 houses have been destroyed in the Rafah region since September 2000.